Title for installment: Deflation 101 -- America ‘Zero Bound’: Is Economic Collapse Imminent?

[Critical update (since initial post on January 12th, 2009): The Consumer Price Index (CPI) decreased 1.0 percent in December, 2008. Read below to understand why this may signal the onset of deflation and ultimately a depression. It may be likely that the 'media masters' controlling our mainstream media will brush over or censor the bad financial news, as the U.K. is apparently starting to do. Regardless, President Obama's inauguration has certainly eclipsed it.

The content of this post based primarily on 14th Federal Reserve chairman Ben Bernanke's presentation in 2002: Deflation: Making Sure 'It' Doesn't Happen Here.

Introduction: We seem to hear a lot about 'inflation' on the mainstream media, but little about 'deflation': inflation's ugly opposite, and the potential player in America's economic collapse ('depression'). Please consider first reading 'Deflation 101' below, if you are not familiar with the concept of deflation (the vicious cycle by which the prices of our goods and services can drop to catastrophic levels, deflate). N.b.: All emphases ours.

Ben Bernanke's Insights from the 2002 Report [Important: these thoughts of his were communicated to us seven (7) years ago]:

1. “I believe that the chance of significant deflation in the United States in the foreseeable future is extremely small…[because of]…the resilience and structural stability of the U.S. economy itself.” “A particularly important protective factor in the current environment is the strength of our financial system: …our banking system remains healthy and well-regulated….”

2. “Of course, we must take care lest confidence become over-confidence…. I would be imprudent to rule out the possibility [of deflation] altogether.”

3. “The…bulwark against deflation in the United States…is the Federal Reserve System itself. I am confident that the Fed…has…sufficient policy instruments to ensure that any deflation that might occur would be both mild and brief.” Note: We Americans have been lead to believe that the secretive Federal Reserve ‘policy instruments‘ are sane and in our best interest, and yet less than two months ago Congress clearly indicated that our money is manipulated secretively by the Federal Reserve and that “Secrecy of the monetary policy process…promotes increased financial market uncertainty [and] unnecessary volatility….”

4. The Federal Reserve’s primary ’policy instrument‘ is the way it increases and decreases the interest rates on the money it lends to its banks. And this from Mr. Bernanke is extremely important: “Deflation may result if…the [interest rate for banks] declines to zero or very close to zero,” a rate (a lack thereof) which the Federal Reserve has now achieved.

5. Once the…interest rate is at zero, no further downward adjustment in the rate can occur…. At this point, the nominal interest rate is said to have hit the “zero bound.”

6. ‘Zero Bound’ is when the Federal Reserve can no longer manipulate the money supply by lowering interest rates to stimulate us to buy, as is their ‘policy‘. Said another way, per Fed chairman Bernanke: When the Federal Reserves “policy rate falls to zero -- its practical minimum -- monetary policy loses its ability to further stimulate aggregate demand and the economy.”

7. America is now ’zero bound,’ and 7 years ago Bernanke wrote, “Suppose that, despite all precautions, deflation were to take hold in the U.S. economy and, moreover, that we were to fall to zero. What then?”

8. “Some…have concluded that when that [interest] rate stands at or near zero [ is 'zero bound'] the [Federal Reserve] has ‘run out of ammunition’ -- that is, it no longer has the power to expand aggregate demand and hence economic activity.” “Hence…the situation is one to be avoided if possible.”

9. Now that ‘zero bound‘ has been reached -- where interest rates have been lowered to $0.0% -- the Federal Reserve “can no longer use its traditional means of stimulating…demand [by lowering interest rates] and thus will be operating in less familiar territory.” N.b.: Isn’t this an admission that the ‘traditional means’ -- the ‘policy instruments’ -- used by the Federal Reserve ’system’ are tenuous at their core?

10. The Federal Reserve’s “inability to use its ‘traditional methods’ may complicate the policy-making process and introduce uncertainty in the size and timing of the economy’s response to policy actions.”

11. [Being 'zero bound'] “creates…an even greater burden on households…that [have] accumulated substantial debt before the onset of the deflation…because, even if people are able to refinance their existing debts at near the low [0.0%] interest rates, with [housing] prices falling, they must still repay the principal….”

12. Bernanke continued: “I should emphasize that my comments on this topic are necessarily speculative, as the modern Federal Reserve has never faced this situation [of being zero-bound] nor has it pre-committed itself formally to any specific course of action should deflation arise.”

[This is the end of Bernanke's comments from his 2002 report]

Deflation 101: Prerequisite ‘lesson on deflation’ (largely from Wikipedia):

A. Deflation is associated with recession and more rarely, long term economic depression.

B. Deflation is caused by a general, widespread collapse in the public’s demand for goods and services -- across all or most industries.

C. Result of deflation: prices for goods and services drop (deflate) severely, as businesses cut prices on an ongoing basis to entice buyers to buy. If we consumers don’t buy, then the businesses must cut costs even more, with employees first to be cut (rising unemployment). BTW: Rising uninsured too. In the ER we’re noticing a definite increase in unemployed -- and thus uninsured -- patients who cannot afford to pay cash to see their doctors, but who know we in the ER must see them for free (seemingly for any disease condition). These patients are stressed. And as the volume of these uninsured ER patients increases, their own economic/financial stress is translating to the ER work environment. The stress is becoming palpable.

D. In deflation, because the price of goods is falling, even though we consumers may still have dollars to spend, we have an incentive to delay purchases and consumption until prices fall further (’waiting for the bottom’), which in turn reduces overall economic activity and contributes to to the ‘deflationary spiral’ (a collapse in total demand of all goods and services; e.g., a decreased demand for that real estate you may be trying to sell). N.b.: I’ve now come to understand why ‘waiting for the bottom‘ to buy and ‘waiting for the top‘ to sell each contribute to deflation and inflation respectively.

F. Now that the Federal Reserve -- and thus America -- is ‘zero bound‘ (as above), the ‘Fed’s’ primary tool (’policy instrument‘) -- the manipulation of the interest rates it requires of its banks -- has ‘circled the drain.’

G. Federal Reserve members may try to pull out a few remaining, less dazzling ‘policy instruments’ from their bag of tricks, but concern is growing that they may fail to provide real solutions to preventing what could be an upcoming deflation crisis (depression).

Gold 101: Things on Earth are precious and valuable only if they are limited in supply. Diamonds are valuable primarily because they hoarded. This artificially increases their value. Gold is valuable because its supply is truly limited on Earth. Interestingly (as I understand it) if/when we have a gold-based currency, periods of relative deflation tend to undulate normally/healthfully with periods of relative inflation (’yin-yang’ balanced scale phenomenon). For example, if the prices of goods and services drops (deflates), the purchasing power of each gold-based unit of currency increases and people can by more with their ‘dollars.’ This stimulates the economy. Conversely, when the prices of goods and services increases (inflates), the purchasing power of each gold-based unit of currency decreases; people can then buy less with their ‘dollars’ and this cools the economy.

Ironically, Ben Bernanke used gold as an example (in his 2002 address), of why something has value, indicating that if through alchemy we could synthesize gold, it’s value and thus its price would plummet. This begs the question: Since we cannot synthesize the precious metal, why are we not using it as the standard for our currency, instead of continuing with the Federal Reserve’s phony, secretive system, which is based on their ‘alchemy‘ of worthless bank notes (’dollars’)?

Dollarization 101: Economies based on unstable currency, like the one we have now in America, spawn the use of alternative currencies. This is called ‘dollarization’: the use of foreign or alternative domestic currencies. When our ‘official’ money becomes unreliable, dollarization allows commerce to continue to some degree, unless governments make it illegal to use the alternative currency, as America’s did during the Great Depression, or if government shuts down the alternative currency resources, as the FBI attempted to do recently with the gold-based Liberty Dollar.

Mining 101: Deflation also acts as a stimulus to increase mining and exploration, since one easy way to make real ‘money’ (something of limited supply, and thus with true value) is, according to the Wikipedia post, to ‘dig it out of the ground.’

Barter 101: As the value of the dollar tanks, citizens take it upon themselves to do what they can to control chaotic economics by resorting to barter (and alternate currencies, as above). In effect, barter acts as protective tariff in deflated economies, encouraging local consumption of local products and services.

Inflation 101: As Bernanke said, with deflation and the ‘zero bound‘ state, it becomes impossible for the Federal Reserve to manipulate interest rates any further to try to stimulate consumer and business spending. One of the only other ‘policy instruments’ ‘the Fed’ then has then is to simply print and circulate increasing numbers of fiat paper ‘dollars’ (and simply enter more ‘money’ into the Federal Reserve digital balance sheets). By doing this, the value  of the fiat-based currency approaches zero (in a sense becomes ‘bound for zero’ too). [See Zimbabwe dollar below].

CPI 101: Decreasing Consumer Price Index (CPI) is a helpful indicator of possible deflation, because it allows us to watch the ‘prices consumers pay’ drop (as consumers and business hold off making purchases until the nebulous ‘bottom’ is reached.

We need to remember that the Federal Reserve can and will intervene with another of their ‘policy instruments’ to artificially keep the CPI from decreasing: By simply increasing the supply of paper dollar bills in circulation, consumers ’spending behavior’ will increase. Unfortunately, however, with more worthless paper dollars in circulation, the cost of goods and services (the price -- the number of paper dollars -- citizens pay for the goods and services) will go up (’inflate’).  With a fiat monetary system like the Federal Reserve (instead of America having a gold standard and allowing free market events to take their course), we are guaranteed to eventually have periods of deflation (and possibly depressions) and inflation (and possibly hyperinflation).

CPI Deflation Watch (see Dr. Evan’s post at the top of this link): We had a decline of the core CPI of -0.1% in October 2008, and only a 0.02% increase in November, 2008. According to Professor Evans at Brigham Young University, two consecutive declines in the CPI may signal an increased likelihood that we’re faced with a destructive deflationary period (the precursor of a depression). It is noted on Dr. Evan’s CPI Deflation Watch post that 0.02% is practically zero, but “at least…we dodged the deflation bullet for the month of November.” When this installment of TGM was initially posted last month, we wrote:

“The data for the next CPI report, for December (from the Bureau of Labor Statistics) comes out on January 16th, 2009. Let’s hope the CPI turns out to be in the positive direction, not negative. Professor Evans certainly understands being ‘zero bound’ when he wrote: “The scary thing about the January release is that the Fed can’t lower the fed funds rate anymore to try and stimulate the economy. The next CPI report comes 4 days before Obama’s inauguration. It will be interesting to see if the events of the inauguration eclipse important CPI news, especially if it indicates a drop in the CPI.”

Unfortunately, the Consumer Price Index (CPI) did decrease by 1.0 percent in December, 2008. And it is likely that President Obama’s inauguration (and the latest ‘war’ between Israel and Palestine, and the downed U.S. Air flight, etc.) did eclipse this news about the declining CPI. Regardless, if Professor Evans is correct -- that two consecutive monthly declines in the CPI could signal an increased likelihood of deflation (which can be the precursor of a depression), then the the current CPI trend of…

-0.1% (October) → +0.02% (essentially zero percent in November) → -1.0% (December)…

Should probably be a big concern to us all (CPI →  ? percent for January…

Current Recession → Deflation → Depression? We are now officially in a recession.  And 7 years ago we were told by Ben Bernanke in his address, that it would be ‘unlikely’ that an ongoing fall in prices (like we are now seeing) would continue into an all-out deflation (a collapse, a ‘depression’). But I wonder what Mr. Bernanke is thinking now, what with the Federal Reserve, and thus America, being ‘zero bound.’ All of the preconditions for a collapse are here, especially the fact that the Federal Reserve has no more ‘manipulative wiggle room’ to lend our money at lower interest rates to try to stimulate the economy (since there’s nothing lower than a 0.0% rate).

According to Reed Construction Data, deflation -- and a stagnant economy -- has become a much larger risk in the last few months. And ”ominously, some of the leaks from the Obama transition team [many of whom are Bilderberg and Trilateral Commission folks], suggest an inclination to stop the recession at any cost, even if this means [using fiat dollars to eventually be 'substantiated' by our tax dollars] to prop up failed enterprises and households.”

Excuse me? “An inclination“? It’s called the ‘bailout,’ and it already started during the Bush administration. Regardless, the ultimate result is this: Those ‘economically-compromised crippled enterprises and houses’ will remain a significant drag on our economy for many years to come.

And what if this is the beginning of a deflationary period leading to ‘Great Depression #2′?  Well, believe it or not, there are liberal (’socialist’?) thinkers in Washington -- like Stephen Leeb -- who  appear to be ‘fine’ with the consideration  of a World War III as a solution to a next depression!

Federal Reserve to the ‘Rescue’?: Mr. Bernanke assured us 7 years ago in his address that the Federal Reserve system “ensures that the financial system will remain resilient if financial conditions change rapidly.” His promises and talk are cheap. America’s ‘Federal Reserve’ is now ‘zero bound.’ So now, what are ‘the Fed’s’ only recourses -- to 1) achieve prevent deflation and possible depression, 2) provide a $700 billion bailout and 3) a $500 billion tax cut -- when there is no tangible, real value to our dollars in the first place?

Incredible answer from Bernanke 7 years ago: “Government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost…. [Federal Reserve 'alchemy' to the rescue!]…. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

Notice he doesn’t say the ‘printing press’ is a cure to economic woes, only that it will ‘generate higher spending and create inflation‘! Oh, and a ‘determined government‘? The Federal Reserve operates autonomously and secretly from ‘we the people’ and the ‘government’ (which is supposed to mean by our representatives in the U.S. Congress.

Incredibly, Mr. Bernanke says that simply printing more money is the solution! Bernanke even goes so far to say, “we can take comfort that the logic of the printing press...must assert itself, and sufficient injections of money will ultimately always reverse a deflation.” Of course that ‘policy instrument’ will ‘ultimately always reverse a deflation,’ but is “the logic of the printing press” really logical? Isn’t it hard for you to believe what your reading? Bernanke and his minions are pulling the wool over the eyes of us Americans and they know it:

Notice from Bernanke’s 2002 address, that in his very same ‘breath’ (read it yourself) he says, “By increasing the number of U.S. dollars in circulation…the U.S. government…reduce[s] the value of the dollar…, which is equivalent to raising the prices…of…goods and services.” I’m no economist, but how can reducing the value of America’s currency -- and raising the prices of all its goods and services -- be a sound, long-term solution? And yet then Bernanke cites “academic literature warning of the possibility of an uncontrolled deflationary spiral, in which deflation feeds on itself and becomes inevitably more severe.”

And what Mr. Bernanke didn’t describe, resulting from his ‘logical’ ‘printing press’ solution (the printing of more worthless, fiat dollars), is the opposite extreme: an ‘uncontrolled inflationary spiral’ (runaway inflation). Printing more and more paper money ‘dollars’ may be perceived as helping initially, but it won’t be the solution to bailing out America in the long run. Are Americans really too stupid and/or complacent to see what’s going on here? And who gets all those paper dollars before we do? The ‘trusted’ bankers (whoever they are).

Got milk? Let’s learn from the Zimbabweans who have allowed their corrupt, fiat monetary system to bring them to the point of now paying $24 billion of their own ‘dollars’ for a gallon of milk (see the link). Is this possible for the U.S. ‘dollar’?

Federal Reserve Hijack of America: Some analysts are saying the three most egregious Constitutional compromises we are allowing include: 1) America’s foreign interventionism/occupation/’nation building,’ 2) The massive financial bailouts of companies and banks (’nationalization’ of economies = ’socialization’), and 3) Especially the ‘Federal Reserve’ system for America’s ‘currency.‘

Is it possible that the powers of the U.S. Constitution are being hijacked by ‘our own’ Federal Reserve? For example, see this video where Congressman Ron Paul asks why Federal Reserve Chairman Ben Bernanke cancels a Congressional hearing on the Federal Reserve to attend a secretive meeting in Switzerland:

My dad has told me for years that ‘we the people’ have been made slaves to the secretive Federal Reserve, the U.S. ‘Treasury’ and the ’strong arm’ of those two entities: the Internal Revenue ‘Service.’ Our representatives in Congress are allowing the deceptions and travesty to continue. And we need to be asking why. Remember that the Federal Reserve is a private organization which operates secretively, has no ‘reserve’ and prints money out thin air.

I would think Bernanke’s ’solution’ for us Americans (’the logic of the printing press’) should be leading to a revolt, even American Revolution #2 (links to book, The Revolution by Ron Paul). That is if there are enough patriotic, independently thinking Americans left in this country. Please consider joining the Campaign for Liberty (it’s free), and get their regular email updates about what is going on with America, and what you can do to try to save ‘her.’

Faith in ‘The Government’ Does Not Mean Faith in the Federal Reserve Because ‘The Fed’ is Unconstitutional: America’s ‘Federal Reserve’ is not officially ‘federal’. Nor does it have a ‘reserve.’ And now this corrupt monetary system is ‘zero bound.‘ Should we still sit back and believe Ben Bernanke’s conclusion seven years ago that “the chances of a serious deflation in the United States appear “remote’ because of our economy’s underlying strengths, and because of the determination of the Federal Reserve and other U.S. policymakers to act preemptively against deflationary pressures”?

Our only hope may have been to 1) avoid any and all of the ‘bailouts’ that were (and still are) rushed through congress, 2) let the economic ‘detritus’ fall where it may and 3) concentrate on putting an end to the Federal Reserve and get back to a gold-backed currency. Maybe it’s not too late.

For Your Entertainment and Education: Pertinent music from music from Michael Adams, ‘Health Ranger’:

Final Words: If the CPI declines again in January, we may be in for deflation. And ‘the Fed’ -- to try to prevent us from going into another great depression -- will rev up essentially the only ‘policy instrument’ it has left in its bag of tricks: ‘the printing press.’ That’s not good medicine for America. Instead of allowing for banks and companies to collapse (let free enterprise and competition operate), and getting America back to a gold standard (like other countries appear to be doing), we’ll sit back and watch as the counterfeit, fiat monetary system of the secretive Federal Reserve starts printing gobs and gobs of valueless ‘dollars.’ That sound’s logical? According to Ben Bernanke it is.

Action to consider: Receive email updates from http://www.campaignforliberty.com/index.php and carefully monitor the Consumer Price Index (CPI).

Editor’s note: Audio for this installment of Political Health and Healing is forthcoming.

Title: ‘Fed Health’ Coming to You and Your Doctor Soon? Or: Daschle’s Federal Reserve-based ‘Fed Health’ is An Insult to Thinking Americans.

Would Tom Daschle’s Fed Health Dash Our Hope for Health Freedom? TGM is About Integrative Medicine and freedom of choice in health care: having the freedom to integrate the best evidence-based therapies and diagnostics from all medical disciplines. Secrecy cannot be a part of that approach. However, according to a recent article in Medical News Today, submitted by the Citizens’ Council on Health Care, President-Elect Barack Obama’s choice of Senator Tom Daschle – to head up the department of Health and Human Services (HHS) – might entirely dash our hopes of real, lasting holistic reform of our health care system, since our health freedoms under Daschle may be severely compromised under his Fed Health plan.

The article says this: “If Mr. Daschle succeeds with Fed Health, Americans can expect that all private medical decisions-and their doctors-could soon be under federal control.” Mr. Obama’s choice for Secretary of HHS “signals a plan to eliminate free-markets and resurrect national health care….”

If the Federal Reserve and its banks are secretive about what’s going on with our tax dollars, how could we think anything different for our health care under a Federal Reserve model? And if this is true, why isn’t mainstream media warning us? Maybe there’s just too much other bad news to report.

Senator Tom Daschle: Our New Representative at HHS. Here’s what he apparently wants:

1. A national health board modeled after the Federal Reserve’s board! This Federal Health Board would oversee the entire health care system. Mr. Daschle calls it “Fed Health“. If this is true, it should be alarming to any American who has a functional brain. The ‘Criticisms’ section on Wikipedia’s Federal Reserve page reminds us that Milton Friedman outlined how the Federal Reserve caused the great depression. Is ‘The Fed’ repeating its history today? Regardless, do we want our national health care to be modeled after a corrupt, counterproductive organization like the Federal Reserve that operates as an organization largely autonomously, outside of Congressional oversight? We’re with Ron Paul who wisely recommends that the Federal Reserve be abolished. Here’s what else Daschle apparently wants:
2. Federal government to direct the practice of medicine and control all facets of health insurance.
3. Ongoing surveillance of your personal health for government research purposes.
4. Government officials to have access to your patient records online for monitoring of physician treatment decisions.

No Thanks, Obama and Senator Daschle. Integrative medicine doctors will be tempted to use various explicatives at the thought of what Daschle wants. Take for example #5 (above): monitoring your doctor’s treatment decisions? Integrative medicine doctors base treatment decisions on their experience with their patients and on published clinical research. Many treatments are often outside the realm of ’standard’ ‘allopathic’ medicine – drugs and surgery – and do not fall within what Daschle’s ‘Fed Health’ would dictate as being their ’standard of care.’

Fed Health’s Standard of Care = Fed Health’s Standard of Scare. What if, for example, you want the freedom to choose EDTA chelation as a treatment for your cardiovascular disease – angina or claudication – or simply for prevention? (TGM #15, 14, 13) Or if the anticipated flu epidemic arrives and you and your integrative medicine doctor decide to treat you with an intravenous infusion of dilute hydrogen peroxide to cure your flu?

[Click image to download full Lancet report]

Or what if you become infected by MRSA or one of the other growing numbers of bacteria that have become resistant to antibiotics, and you request that your doctor treats you with photoluminescence (UV light-energized blood)?

[Image links to the book Dr. Douglass' father's wrote.

None on TGM team receive proceeds from book sales]

Or what if you and your doctor decide to try high-intensity magnetic therapy to treat a stubborn, hard to treat condition you may have?

[Image links to A.M.R.I. of Washington]

These are just a few examples of evidence-based ‘integrative medicine’ therapies out of thousands. You probably want and need the freedom to choose. Good medicine is NOT about limiting our therapeutic armamentarium to only drugs and surgery. But what if Daschle and other ‘big brothers’ with HHS and ‘Fed Health‘ scare you and your doctor with: “That’s not the standard of care. You can only use anti-bacterial and anti-viral drugs for your condition. Cease your practices or be fined or go to jail” That’s what may be in store.

What Does Fed Health Have to Do With Unions and Corruption? ‘As a man thinketh, so is he.’ Or put another way: the character of a man = his thoughts + feelings combined. It is our opinion that to be even somewhat ‘okay’ with plans like Fed Health, politicians who devise or endorse plans like this – and U.S. citizens who support them – would have to think and feel like labor union bosses, mobsters and Federal Reserve members who are clearly sacrificing U.S. Constitutional principles for the sake of total power and control. Their thinking goes something like this: “We’re entitled to these powers, like locking in higher wages for workers, and dictating how medicine is practiced. Therefore, we’ll act irrespective of local, state or federal law. In fact, our wants/our entitlements supersede the U.S. Constitution. What if we want money? We’ll get it outside Congressional negotiations. We’ll get it from the Federal Reserve.” The perverted thinking may become most obvious from what we may be about to see happen with American health care: Daschle’s Fed Health, or some version of it.

How Quickly Fed Health Cometh? States are already having to cut Medicaid coverage during these economic hard times. More cuts are expected in 2009. Yet here’s the clincher: Some of our representatives in Congress are seeing a need to allow the millions of growing unemployed U.S. citizens who have lost health benefits to start receiving Medicaid benefits with our tax dollars paying the entire bill, of course. How quickly might a ‘Fed Health’ be implemented? As soon as enough emergency departments around the country start reporting increases in ‘crisis level’ volumes and casualties, as increasing numbers of U.S. citizens resort to the ‘ER’ as last resort for their acute health care needs.

Where does this type of unAmerican, ‘Fed Health’ thinking and planning come from? As noted on TGM #16 post, this article from American Free Press clearly indicates that Senator Tom Daschle is part of the ‘One World Government Bilderbergerite’ mentality. To find Daschle in the list of other Bilderberger meeting attendees, see this Wikipedia link. One World Health Care anyone? It appears that Senator Tom Daschle is not good for your health or good for good medicine either.

The only solution: We predict that health care – socialized medicine under a Fed Health-like plan – may be the final straw that breaks America’s back. If it’s not to late, the only solution is to restore honor and integrity in Washington, with the likes of Representatives like Congressman Ron Paul and do away with the secretive, unconstitutional Federal Reserve – if that’s still possible. Please see TGM #16 and 17.

Good Medicine Word of the Week. It’s disgusting in our opinion: ‘Fed Health‘ – the concept for Senator Tom Daschle’s health care plan for America, using the Federal Reserve as the model. All of your private medical decisions could soon be under federal control. Is this the kind of change America wants and needs?

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